The future for invoices and receipts

It is becoming increasingly noticeable that after a purchase is made in a shop or restaurant, the customer is asked ‘Do you want a receipt?’. Answering ‘no’ may help reduce paper, but business customers intending to claim against tax should always answer such a question in the affirmative. Keeping receipts is not a legal requirement for most personal transactions as consumer rights remain valid without one, other evidence (e.g. bank statements) proving that the transaction has taken place. However, for businesses, the situation is very different when claiming expenses against tax.

HMRC’s stance

Receipts and invoices are the primary evidence of expenses incurred relating to business activities. Without receipts, HMRC may disallow expense deductions and, if missing or inaccurate records are found in an investigation, businesses may face significant fines or additional scrutiny.

Recent tax cases highlight HMRC’s increasing insistence on proper documentation. The tax case of Mediability v HMRC [2023] UKFTT 315 (TC) underlines the importance of receipts, providing a real-world example of how a lack of correct evidence can undermine expense claims. In this case the taxpayer attempted to justify business expenses using solely bank statements without supporting receipts. The Tribunal ruled that this was insufficient, and many of the claims were disallowed.

The tax case of the actor, Tim Healy, in T Healy v HMRC [2012] TC01940 is another case which shows that inadequate record-keeping (particularly missing receipts) can cost taxpayers valuable deductions. Mr Healy claimed tax deductions for accommodation, subsistence and taxi fares incurred whilst working in London. Some claims were allowed, but crucially his subsistence expenses and taxi costs claims were not because he could not provide sufficient evidence (i.e. receipts) to show whether the expenses were business related.

Electronic storage

For businesses dealing with the final customer (e.g. restaurants and shops), paper receipts will need to remain. For other businesses, HMRC believes the way of the future is that where paper receipts are issued, businesses wishing to claim tax relief for such expenses must scan and store receipts digitally. Making Tax Digital is the first step towards digital record-keeping.

E-invoicing v paper

Many B2B businesses are moving away or have already moved away from paper receipts, replacing them with e-invoicing.

E-invoicing is the digital exchange of invoice information directly between buyers and customers or suppliers. Unlike traditional paper invoices or PDF documents sent by email, the e-invoicing process typically begins with the supplier creating an invoice using specialised software. The e-invoice is then transmitted electronically to the customer's system, which automatically receives and processes it. The invoice data is integrated into the customer's accounting system, eliminating the need for manual data entry and paper handling.

Mandating e-invoicing

In the Autumn Budget 2025, the UK government confirmed plans to introduce mandatory e-invoicing for all VAT invoices from April 2029. Under this scheme, VAT registered businesses will be required to generate, transmit and store invoices in specific electronic formats that tax authorities can automatically process. A detailed implementation roadmap will be published as part of the 2026 Budget.

E-invoicing is not HMRC’s initiative. Many EU countries have already mandated e-invoicing, with others, notably Belgium, France and Poland, introducing implementation in 2026. Different methods are being used by each country and HMRC is looking closely at the success or otherwise of the methods used. For example, Belgium plans to focus initially on how invoices are sent, keeping reporting separate, and France will use approved private platforms to handle invoice exchange, thereby introducing a new layer of digital reporting. Poland intends to tie e-invoicing directly to real-time tax reporting where invoices are sent to the government’s tax platform. Under this process, the system will check each invoice, assign it an official reference number and send to the customer. As every invoice will move through the government’s system, the tax office automatically receives the data.

Practical point

Businesses can prepare for mandation of e-invoicing in the UK by considering using accounting software and/or dedicated receipt apps. Many software programs available already automatically extract data from emailed invoices, saving time, reducing errors and ensuring electronic records meet HMRC’s current and anticipated requirements.